RMG owners seek export tax adjustment worth Tk611cr 

Despite a one percent tax on source for export, the readymade garment (RMG) factory owners enjoyed rebate for the past couple of years. 

In the current fiscal, the government has set the rate at 0.25 percent.  

However, the businesspeople of this sector are in trouble with a Statutory Regulatory Order (SRO) issued after four months of this fiscal has elapsed. 

Unlike the SROs of the past years, the latest one had no provision of retrospective effect, leaving RMG owners in confusion about getting back TK611 crore already paid in the interim period as source tax on exports.  

The sector's apex body, Bangladesh Garment Manufacturers and Exporters Association (BGMEA), in a recent letter requested the National Board of Revenue to adjust the additionally paid tax and not to deduct any tax until the amount is adjusted fully. 

BGMEA explained that calculating 1% rate, the NBR deducted Tk611 crore additionally from the beginning of this fiscal year to 21 October.  

So, they have called for tax adjustment as they have to face a heavy financial loss. 

The letter, signed by BGMEA President Dr Rubana Huq, said, the earlier SROs of 2016, 2017, and 2018 had implementation date effective from July 1. 

However, there is no retrospective date on the October 21 order. 

Mentioning the financial loss of the retrospective date, BGMEA says that the amount of export in this four months (from July 1 – October 21) was around Tk81,584 crore. 

And the NBR deducted tax worth Tk815.85 crore from source at one percent rate. But it was supposed to be Tk204 crore based on the 0.25 percent following the SRO directives. 

The BGMEA proposed that the NBR should not to deduct any tax in the remaining part of this current fiscal and in the first half of the next fiscal year. 

Besides, the organisation has also calculated that it is possible to adjust Tk296 crore in this current and Tk315 crore in the next fiscal year. 

BGMEA President Rubana Huq told The Business Standard, "We need to have the deducted amount refunded and readjusted. The effective date should be retrospective and since this was issued on Oct 21, 2019, the excess amount could be adjusted in the next fiscal."

The deducted tax of the interim period was adjusted in previous fiscal years, she said. 

However, the NBR has a different take on the issue. It says the proposal of tax adjustment is not possible as there is no retrospective date mentioned in the issued SRO. 

The NBR officials said that adjustment can be made only if the SRO is effective from July 1. 

"The ministry of commerce and ministry of finance, at a joint meeting, took a decision about export tax reduction from the source. There is no option to adjust or deduct tax by zero percent before new SRO issuance," said Ikhtiar Uddin Mohammad, NBR first secretary (income tax policy). 

The garments businesses have to pay a one percent tax from source for exporting their goods. However, the RMG was getting tax rebates for past years through SRO and they enjoy the same facility this year. 

By reducing tax on source for the RMG, an order was issued on October 20, last year.   

The reduced tax is 0.25 percent from existing one percent. The order will remain valid till June of this year. 

But the order did not mention from when it would be effective. As a result, the RMG owners are confused. 

The RMG brings 83 percent of the overall export revenue for the country. Recently, the growth of this sector slipped. From July to November of the current fiscal, export rate has reduced 7.74 percent. 

But the growth of RMG export of countries like Vietnam is 5.56 percent while Pakistan has a growth of 4.76 percent.